ASIC to dish out tougher penalties

By Killian Plastow

25 October 2017

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The federal government has recommended substantial increases to penalties issued by ASIC, a move prompted by Financial System Inquiry proposals.

Minister for Revenue and Financial Services Kelly O’Dwyer has welcomed proposals from an ASIC taskforce to give the corporate regulator more scope in its penalties regime to both act as a better deterrent and to better reflect the nature of some misconduct within the industry.

A spokesperson for the minister’s office confirmed that the proposals, made by the ASIC Enforcement Review Taskforce, follow on from the Financial System Inquiry’s recommendation that penalties be “substantially increased”.

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The proposals are outlined in the taskforce’s latest position paper, which identified three key problems with the current penalties regime.

These problems are that many penalties are too small to act as credible deterrents, that the variety of available penalties for some kinds of misconduct is too limited, and that some penalties are inconsistent with equivalent state and Commonwealth provisions.

Subsequently, the taskforce recommended that the penalty regime be modified to provide ASIC with more variety and tougher penalties for a range of misconduct issues, both criminal and non-criminal.

These include changes to penalties for breach of disclosure requirements, which would see the penalty for failing to provide a statement of advice (SOA) increase from a 100 penalty-unit fine and/or a maximum two-year prison term, to a 600 penalty-unit fine and/or a maximum prison term of five years.

Ms O’Dwyer said in a release that increased penalties will “foster greater industry compliance and improve public confidence in the financial system” and ensure that ASIC can effectively regulate the sector.

“The taskforce process will help to ensure that ASIC has the right tools to combat corporate and financial sector misconduct and to protect consumers,” Ms O’Dwyer said.

The ASIC Enforcement Review Taskforce was created in October last year to review the current enforcement regime. It is comprised of representatives of ASIC, the Attorney-General’s Department, the Office of the Commonwealth Director of Public Prosecutions, academic and legal experts, and is led by a panel chaired by Treasury.

Many of the recommendations made by the ASIC Enforcement Review Taskforce reflect proposals initially made by the corporate regulator in March 2014 in its paper titled Report 387: Penalties for corporate wrongdoing.